Markets are up this morning after Chinese stocks rallied overnight. Bonds and MBS are down.

The second revision to first quarter GDP came in at 0.8%, slightly below the Street estimate of 0.9%. This was an upward revision from the initial 0.5% estimate.

Personal incomes rose 0.4% in April, in line with expectations. Personal spending rose 1%, which topped the 0.7% estimate. The personal consumption expenditures index (which is the inflation measure preferred by the Fed) rose 0.2% month-over-month and is up 1.6% annualized. We are seeing some sell-side firms take up their second quarter GDP estimates on this number.

Home prices rose 0.9% MOM and 5.4% YOY, according to the Case-Shiller Home Price Index. This was slightly ahead of estimates. An improving labor market along with tight inventory is driving prices higher.

In other economic data, both the Chicago Purchasing manager index and the consumer confidence index fell.

The highlight of this short week will be the jobs report on Friday, which will be the last big data point before the FOMC meeting in a couple of weeks. The number to watch: average hourly earnings. Average hourly earnings growth has been accelerating over the past 6 months or so, to around 2.5%. You can see the trend in average hourly earnings growth in the chart below:

On Friday, Janet Yellen hinted that the next rate hike is probably at the June or July FOMC meetings.

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I feel like Donald Trump has a good chance of winning the Whitehouse for two major reasons: his populism (a novel campaign strategy in this day and age), and the Democrats’ and the left’s lack of understanding as to what his appeal actually is (arguably, this is why his Republican opponents in the primaries lost, as well).

Believe it or not, Donald Trump has now made a very important policy statement. Introducing what he billed as an “energy plan,” Trump promised to “cancel the Paris Climate Plan.” Unlike so much of what comes from Trump on policy, this is a genuinely clarifying moment, with potentially enormous long-term implications.

Of course, Greg Sargent thinks this is an awful idea, one that dooms any hope Donald had of being president, if in no small part because it means Bernie and Hillary will totally definitely team up to stop Trump now, and that’s all it will take: Bernie and Hillary teaming up. The part where cancelling the Paris Climate Accords actually appeals to a lot of people, and increasing domestic energy production appeals to even more . . . that doesn’t seem to enter into it.

I think that’s just wrong. And the more the Democrats allow themselves to be painted as (or paint themselves as) the side where “it’s sad domestic energy production is losing all those jobs, but, eh, what can you do?” versus Trump’s promise of increasing domestic energy sector jobs and production (never mind the specifics, it’s magic!), the more I think they are mistaking what makes the difference between victory and defeat in November.

I also think it’s interesting that, for Greg Sargent, the significant thing about Trump’s “energy plan” (so-called) is how it will impact the Hillary/Sanders dustup. That’s the take away. Not that Trump’s own dismissal of climate change as an apocalyptic inevitability might actual appeal to Independents or swing-voters, not to mention his promise of supporting domestic energy production.

I don’t think Anthropogenic Climate Change is a big winner for the Democrats. Independents and Republicans can be peeled away by lots of things, such as talk of jobs (green energy jobs!) or ending of perpetual military engagement or promises of financial benefits to the middle class, but I think the prioritization of Climate Change as the Most Important Thing Ever is not the political talisman many seem to think it is. And Donald saying he’s going to pull America out of the Paris Climate Accords (pretty much just posturing bullhockey anyway, good for politicians to preen over and little else) is not going to send shockwaves and fear and disgust through the American electorate.

Home prices rose 0.7% in March, according to the FHFA House Price Index. “While the overall appreciation rate was robust in the first quarter, home price appreciation was somewhat less widespread than in recent quarters,” said FHFA Supervisory Economist Andrew Leventis. “Twelve states and the District of Columbia saw price declines in the quarter—the most areas to see price depreciation since the fourth quarter of 2013. Although most declines were modest, such declines are notable given the pervasive and extraordinary appreciation we have been observing for many years.” Interesting to see prices begin to decline in some states.

A US appeals court threw out the $1.27 billion judgement against Bank of America for Countrywide’s sins related to the “hustle.” The 2nd U.S. Circuit Court of Appeals in New York said the proof at trial was insufficient under federal fraud statutes to establish liability. No comment yet from Manhattan U.S. Attorney Preet Bharara.

Home prices rose 0.7% in March, according to the FHFA House Price Index. “While the overall appreciation rate was robust in the first quarter, home price appreciation was somewhat less widespread than in recent quarters,” said FHFA Supervisory Economist Andrew Leventis. “Twelve states and the District of Columbia saw price declines in the quarter—the most areas to see price depreciation since the fourth quarter of 2013. Although most declines were modest, such declines are notable given the pervasive and extraordinary appreciation we have been observing for many years.” Interesting to see prices begin to decline in some states.

A US appeals court threw out the $1.27 billion judgement against Bank of America for Countrywide’s sins related to the “hustle.” The 2nd U.S. Circuit Court of Appeals in New York said the proof at trial was insufficient under federal fraud statutes to establish liability. No comment yet from Manhattan U.S. Attorney Preet Bharara.

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Markets are higher this morning on no real news. Bonds and MBS are down.

New Home Sales came in much stronger than expected, at an annual rate of 619,000. This is the highest level since early 2008. While it is premature to bust out the champagne quite yet (prior to the bubble, the last time sales were this low was the early 90s), it is an encouraging sign. The Spring Selling season got off to a somewhat slow start, but seems to be picking up momentum. Note this number has an unusually wide margin for error this month, so expect a revision.

Speaking of new home sales, we got second quarter numbers out of Toll Brothers this morning. Earnings beat on the top and bottom lines, with revenues increasing 31% in dollars and 9% in units. Interestingly, average selling prices of signed contracts were flat. Contracts only rose 3%, and the problems were in California, with not enough inventory for sale. They continue to build out their urban apartment segment and plan to expand it to smaller cities and suburbs.

The Richmond Fed manufacturing index fell in May to -1 from 14.

More millennials are living with their parents than they are with a partner or significant other, for the first time in the modern era. This is probably a reflection of a lot of things – from the weak economy to people getting married later in life. However, it does represent pent-up demand for housing.

Foreclosure starts fell to 58,700 in April, the lowest level since 2006. Delinquencies increased slightly, but are still down 10% YOY. The active foreclosure inventory fell below 600,000 for the first time since 2007. The Northeast still has some wood to chop in terms of liquidating foreclosures.

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Markets are flattish this morning on no real news. Bonds and MBS are flat as well

Not a lot of data this week – the biggest number will be the second revision to first quarter GDP later this week. The Street is forecasting GDP rose 0.9%. We will also get pending home sales and new home sales.

Pain in the junk bond market is spreading to the non-commodity space as retailers are beginning to take it on the chin. This is one issue that could certainly cause the Fed to maintain low interest rates. Pain here is generally considered bond bullish as well, which means it is a catalyst for lower mortgage rates.

Mohammed El–Erian says that the markets are still not fully pricing in two more hikes this year. He believes the Fed has a small window in which to pursue normalization and they intend to take advantage of it.

Lending Club’s woes are putting a wet blanket on the rest of the fintech industry. The industry is going from playing offense in Washington to playing defense. The regulators are hungry to bring this industry to heel.

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Stocks are up this morning as commodities rally. Bonds and MBS are slightly lower

Existing Home Sales rose to an annualized pace of 5.45 million in April, according to the NAR. The median home price rose to $232,500, an increase of 6.3% YOY. Total inventory is 2.14 million homes, which represents a 4.7 month supply at the current pace.

One of the Fed’s problems right now is credibility. As the minutes from Wednesday showed, the markets have been relatively complacent about the possibility of a Fed move. Part of that is certainly the Fed’s own doing, as they have tried to prep the markets for a rate hike several times over the past year or so, only to decide that the economy isn’t strong enough to withstand a rate hike. Here is the problem:

This is what the Fed’s forecast for 2015 GDP growth at all of the FOMC meetings starting in September 2013. As you can see, the Fed has been consistently high in its forecast for GDP growth. So, they begin to prep the markets for a rate hike based on their forecast that GDP will improve to a 3%+ rate of growth, and then back off when we start getting real numbers. I suspect the reason is because the Fed’s models are based on the garden-variety business cycle, where inventory build drives the process. We are in the aftermath of an asset bubble, and the problem here isn’t excess inventory – it is excess debt. And aside from the 1930s and Japan’s current experience, we don’t have a lot of experience with it.

Everyone knows auto loans are the new subprime, as low interest rates have pushed investors into riskier and riskier paper. Eight year car loans with rates around the current mortgage rate are common now. The other new issue: negative equity.